AutoZone 2008 Annual Report Download - page 47

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Our executive officers may receive certain benefits if their employment terminates under specified
circumstances. These benefits derive from Company policies, plans, agreements and arrangements described
below.
Agreement with Mr. Rhodes
In February 2008, Mr. Rhodes and AutoZone entered into an agreement (the “Agreement”) setting forth
the severance arrangements previously approved by the Board of Directors in connection with Mr. Rhodes’
appointment as President and Chief Executive Officer and by the Compensation Committee in September
2007. The Agreement provides that if Mr. Rhodes’ employment is terminated by the Company without cause,
he will receive severance benefits consisting of an amount equal to 2.99 times his then-current base salary, a
lump sum prorated share of any unpaid annual bonus incentive for periods during which he was employed,
and AutoZone will pay the cost of COBRA premiums to continue his medical, dental and vision insurance
benefits for up to 18 months to the extent such premiums exceed the amount Mr. Rhodes had been paying for
such coverage during his employment. The Agreement further provides that Mr. Rhodes will not compete with
AutoZone or solicit its employees for a three-year period after his employment with AutoZone terminates.
Executive Officer Agreements (Messrs. Giles and Shea)
In February 2008, AutoZone’s executive officers who do not have written employment agreements,
including Messrs. Giles and Shea, entered into agreements (“Severance and Non-Compete Agreements”) with
the Company providing that if their employment is involuntarily terminated without cause, and if they sign an
agreement waiving certain legal rights, they will receive severance benefits in the form of salary continuation
for a period of time ranging from 12 months to 24 months, depending on their length of service at the time of
termination. Mr. Giles presently has two years of service, and Mr. Shea has four.
Years of Service Severance Period
0— 1.......................................................... 12months
2— 5.......................................................... 18months
Over5.......................................................... 24months
The executives will also receive a lump sum prorated share of their annual bonus incentive when such
incentives are paid to similarly-situated executives. Medical, dental and vision insurance benefits generally
continue through the severance period up to a maximum of 18 months, with the Company paying the cost of
COBRA premiums to the extent such premiums exceed the amount the executive had been paying for such
coverage. An appropriate level of outplacement services may be provided based on individual circumstances.
The Agreement further provides that the executive will not compete with AutoZone or solicit its
employees for a two-year period after his or her employment with AutoZone terminates.
Employment Agreements (Messrs. Goldsmith and Olsen)
Mr. Goldsmith and Mr. Olsen have employment agreements, dated 1999 and 2000, respectively, which
continue until terminated either by the executive or by AutoZone. If the agreement is terminated by AutoZone
for cause, or by the executive for any reason, the executive will cease to be an employee, and will cease to
receive salary, bonus, and other benefits. If the agreement is terminated by AutoZone without cause,
Mr. Goldsmith will remain an employee for three years after the termination date, and Mr. Olsen will remain
an employee for two years after the termination date (each, a “Continuation Period”). Each executive will
continue to receive his then-current salary and other benefits of an employee, and will receive a prorated
bonus for the fiscal year in which he was terminated, but no bonuses thereafter. Each executive’s stock options
will continue to vest and may be exercised in accordance with the respective stock option agreements until the
end of his Continuation Period, after which further stock option exercises and vesting will be governed by the
terms of the respective stock option agreements. If either executive is terminated from his position by
AutoZone or by the executive for reasons other than a change in control, then the executive will be prohibited
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